Five ways to help improve your financial outlook

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5 September 2016 • 10:08am

In today’s uncertain climate we explain the direction to take

It has already been a momentous year following the UK’s vote to leave the EU. But the inevitable uncertainty created by the result does not alter the need for people to put in place long-term plans and take action to help secure their future financial security.

Those plans might include securing the level of investment returns you need to fund the retirement you had hoped for, ensuring you can maintain your living standards, and protecting your hard-earned money for the benefit of your loved ones and future generations. Yet the uncertainty people face today makes it difficult to know which path to take. Inflation is rising as returns on cash hit rock bottom; financial markets are likely to be turbulent for some time; and doubts about future government tax policy can make it hard to plan for the future with confidence.

1. Cash for comfort

In uncertain times the temptation to ‘play safe’ can be even greater, but the prospect of ‘lower for longer’ interest rates means

that those looking to secure their long-term financial future cannot rely on cash to meet their needs.

However, despite the record low returns on offer, cash still has an important part to play as the right home for money that might be needed in the short term.

Holding sufficient funds in cash also avoids the need to sell long-term investments at a bad time, such as after a sudden fall in market values; something investors need to remain wary of in the months and years to come as economic and political uncertainty looks set to continue.

How much cash to keep on standby depends on each individual’s circumstances and attitude to risk. There is no set rule but as a guide, it should be enough to give you the peace of mind that you can meet your expected short-term needs and any emergency or unforeseen expenses – and then a little more to feel really safe.

2. The long view

It’s important to remember that your future financial needs will only be met by taking a long-term view of your investment strategy.

It’s impossible to second-guess the markets in the short term. So making hasty decisions based on rapidly-changing market fluctuations is a risky strategy. One proven approach to help build capital is to invest in companies with a good track record of paying an attractive level of dividends, which you reinvest over a period of, say, five to ten years.

This has paid off in the long run, as Professor Paul Marsh of London Business School explained last year. “While year-to-year stock market performance is driven by capital appreciation, long-run returns are heavily influenced by reinvested dividends. In the UK, in the 115 years since 1900, an index fund with dividends reinvested would have grown to more than 170 times the value it would have attained without dividend reinvestment.”
So the message is clear; reinvesting income can significantly boost the value of your capital over the long term.

3. Diversify your investments

It would be equally unwise to put all your investment eggs into one basket, particularly in a time of such uncertainty. Diversifying a portfolio provides investors with a way that helps to protect their money and search for better returns. Chris Ralph, Chief Investment Officer at

St. James’s Place, the providers of The Telegraph Wealth Management Service says: “A diversified approach is important. At St. James’s Place we take a global view to seeking investment opportunities and expertise, as well as offering our clients a variety of funds that span equities, bonds and alternative asset classes.”

4. Tackle tax

Taxes can create a drag on investment returns over the longer term, and can also have a potentially devastating effect on the value of wealth passed down to future generations. There are some easy ways to tackle this, such as making full use of your annual tax reliefs. These include your Income Tax and Capital Gains Tax allowances, investing in tax-efficient Individual Savings Accounts, and making the most of new allowances for tax-free interest on savings accounts and tax-free dividend income. You should also make sure you’ve given careful consideration to Inheritance Tax planning. In the last tax year the government received a record £4.7bn in death duties in 2015/16, compared to £2.7bn in 2010/11 (source: HMRC July 2016).

5. Ask an expert

At a time of heightened uncertainty, and rapid political, economic and market change, access to financial advice is particularly important. By seeking expert guidance, you can get an informed and holistic view of your financial affairs, and the ongoing support and advice to adapt your plans as your circumstances change.

To help you overcome today’s financial challenges and plan ahead with confidence, The Telegraph, in conjunction with our recommended provider St. James’s Place Wealth Management, is running free Investment and Tax Planning Autumn seminars across the UK (see table opposite).

Previous events have already helped more than 30,000 readers get a clearer sense of direction. To reserve your place at a venue near you, please call 0800 953 5050 or to find out more visit telegraph.co.uk/go/wealth.

The value of an investment with St. James’s Place will be directly linked to the performance of funds selected and may fall as well as rise. You may get back less than the amount invested.

Equities do not provide the security of capital associated with a deposit account with a bank or building society. The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.

The above article was created for Telegraph Financial Solutions, a member of The Telegraph Media Group. For more information on Telegraph Financial Solutions click here.

The value of an investment with St. James’s Place will be directly linked
to the performance of the funds selected and may fall as well as rise. You
may get back less than the amount invested. Equities do not provide the
security of capital associated with a deposit account with a bank or
building society. The levels and bases of taxation and reliefs from taxation
can change at any time and are dependent on individual circumstances.

Telegraph Media Group Limited is an appointed introducer to St. James's Place
Wealth Management plc which is authorised and regulated by the Financial
Conduct Authority.